Goldman Reports Loss of $428 Million

The global investment banking and securities company, Goldman Sachs Group Inc. (NYSE:GS) reported a loss of about $428 million for the second quarter, the first for the investment bank since it went public 12 years ago.

The loss is attributed to the problems it was facing in its private equity portfolio and the global economic slowdown. Goldman Sachs had made a profit of $1.7 billion in the previous year. This year they have reported a loss of about 84 cents per share which is more than the analysts’ prediction of somewhere around 16 to 18 cents a share.

The present scenario has created a difficult environment for the investment banking sector and even Goldman Sachs, highly regarded as the savviest of all trading firms on the Wall Street is also facing the heat.  Goldman Sachs is facing drop in the revenue in investment banking and fixed income divisions due to the turmoil.

The net revenue of Goldman Sachs in investing and lending group has gone to negative at $ 2.48 billion which includes a $ 1.05 billion hit from its investment in industrial and Commercial Bank of China in 2006. $1 billion losses in the equities along with net losses in debt positions which stood at $ 907 million are also included in the figures.

According to the chief executive officer of Goldman Sachs, Lloyd C. Blankfein, the company’s results were significantly impacted by the environment but the client franchise and balance sheet of the company is strong enough to position them well as the markets and economies improve.

The revenue from trade bonds, currencies and other commodities has taken a dip and gone down by 36 percent to stand at $ 1.73 billion compared to the previous year. But the net revenue from equity trading and commissions have shown an increase of about 18 percent to stand at $2.3 billion as the commissions have gone up leading to an increase in the  activity in the quarter.

As it turns out, it is not just Goldman Sachs which has been facing the downturn as JP Morgan Chase 7 Co. (NYSE:JPM) has also reported a drop in the third quarter profits by 4 percent last week. The company had registered a profit of $ 4.26 billion. Morgan Stanley (NYSE:MS) is down by 44 percent this year and the company is scheduled to report the earnings tomorrow.

Unlike these companies, Citigroup Inc. (NYSE:C) has registered an increase in its profits which has been credited to a onetime accounting gain.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.